Your Tax Dollars Are Keeping the Biggest Smelter in the Country Open — Here's the Deal
The federal and NSW governments are spending $2.5 billion of public money to keep Australia's largest aluminium smelter running. The catch: the smelter has to switch from coal-fired power to renewable energy by 2033.
Prime Minister Anthony Albanese and NSW Premier Chris Minns announced the deal at the Tomago smelter near Newcastle on Thursday, 13 August 2026. Rio Tinto, a joint owner of the smelter, put out its own statement welcoming the agreement the same day. The Guardian
Here's the timeline. Tomago's current electricity contract with power company AGL runs on coal and expires in December 2028. After that, the smelter moves to a new 10-year agreement running through to 2038. Tomago is a massive customer — it uses 950 megawatts of constant power, making it the single largest electricity user in the country. It alone takes more than 10 per cent of all the power generated in NSW. Rio Tinto
Think of it this way: the smelter uses about as much electricity as a small city, every hour of every day.
The government's pitch is about climate. By 2033, the smelter is supposed to run on clean energy only. That would cut its greenhouse gas emissions by 7.1 million tonnes a year — about 1.5 per cent of Australia's total climate pollution. The governments say the deal will also back nearly 3,000 megawatts of new renewable energy and storage in NSW, which is more than a giant coal-fired power station produces.
"Storage" in this context means things like big batteries that store power from solar and wind for when the sun isn't shining or the wind isn't blowing. That matters because a smelter needs power around the clock.
Federal energy minister Chris Bowen said the deal was developed with the Clean Energy Finance Corporation (a government-owned bank that funds green energy projects) and Snowy Hydro. The new wind farms, solar projects and batteries will be spread across NSW, not just concentrated in the Hunter Valley. These projects already have environmental approval but haven't yet reached a final investment decision — meaning no one has committed the money to actually build them.
The smelter's owners, for their part, have committed to investing $1.1 billion in Tomago over the next 12 years, including $100 million specifically for decarbonisation. The $2.5 billion public contribution requires the smelter to spend at least that $100 million on renewable energy. ABC News
Rio Tinto Aluminium and Lithium chief executive Jérôme Pécresse said the smelter now had "a pathway to long-term, cost-competitive, low-carbon power."
The stakes for the Hunter region are significant. The smelter directly employs about 1,000 people and is said to indirectly support around 5,000 more jobs. A NSW Parliament paper from February 2026 warned that closing the smelter would threaten over 1,000 direct jobs and up to 3,000 indirect ones. Tomago produces 40 per cent of Australia's aluminium, which the same document called one of the most essential materials in the country. NSW Parliament
Minns called the deal vital to the local and broader economy.
This is the third time the Albanese government has stepped in to prop up heavy industry. The Commonwealth previously committed $2 billion for Rio Tinto's Boyne aluminium smelter in Queensland, backing $7.5 billion in new renewable energy and storage in that state, and $2.4 billion for steelworks in Whyalla, South Australia. Add Tomago and the total approaches $7 billion in subsidies to keep domestic metals production going while pushing these operations off coal-fired power.
The basic idea in all three deals is the same. Heavy industry can't afford the electricity prices the market is charging, so the government steps in with public money to bridge the gap. In return, the companies have to commit to cutting their emissions.
The key question is whether the renewable projects Bowen talked about actually get built. The government has picked projects that already have environmental approval, which helps. But approval isn't the same as a construction guarantee, and backing up a smelter that needs 950 megawatts around the clock is a serious engineering challenge. Rio Tinto's own targets aim for more than 50 per cent renewable electricity at Tomago by 2030 and 100 per cent by 2035. The government deal tightens that to full clean energy by 2033.
The politics are fairly plain. The Hunter is Labor heartland. A smelter closure on the government's watch would be an economic shock and a political headache no government wants. The Coalition will attack the cost to taxpayers. The Greens will say the decarbonisation isn't fast enough and question why a mining multinational needs subsidising at all.
What the deal actually delivers, versus what was promised at the press conference, will be measurable soon enough. The 2028 AGL contract expiry is the deadline that matters. Everything between now and then is preparation.
